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Brussels, 6th June 2001

Financial services: Commission creates two new committees on securities  (see also MEMO/01/213)

The European Commission has adopted two Decisions to create a European Securities Committee (ESC) and a Committee of European Securities Regulators (CESR). The Commission's initiative responds to the Stockholm European Council Resolution in March on more effective securities markets regulation, in which the European Council welcomed the intention of the Commission to immediately establish these committees. The two advisory Committees will play a crucial role in assisting the Commission in its task of implementing the Financial Services Action Plan and speeding up the legislative process. The ESC will be composed of high-level representatives of the Member States. It will advise the Commission on issues relating to securities policy. At a later stage, when implementing powers are devolved to it through Co-decision procedure, it will also act as a regulatory committee. The CESR is set up as an independent advisory body composed of representatives of the national public authorities competent in the field of securities in the Member States. It will advise the Commission on the technical details of securities legislation. It will also help enhance co-operation between supervisory authorities so as to ensure more consistent day-to-day implementation of EU legislation in the Member States.

Internal Market Commissioner Frits Bolkestein said "These two Decisions to create the Securities and the Regulators Committees demonstrate the Commission's determination to move rapidly forward in implementing the Stockholm European Council Resolution and the Lamfalussy proposals. These Committees will play a vital role to speeding up the implementation of the Financial Services Action Plan and ensuring better and more consistent implementation of Community law. They represent crucial components of a new European regulatory network to build an integrated capital market in the European Union. The prize is enormous, and that is why we must complement the European Union's political efforts with its best regulatory brains and get both working in the same direction."

An integrated securities market by the end of 2003

In Stockholm, Heads of State or Government stated that "Every effort should be made by all parties concerned to implement key steps for achieving an integrated securities market by the end of 2003". To achieve this, the legislative process needs to be speeded up. The regulation of securities markets must be sufficiently flexible to be able to respond to market developments and to ensure that the EU is competitive and can adapt to new market practices and regulatory standards. This must be achieved while respecting the requirements of transparency and legal certainty and fully respecting the Treaty provisions, the prerogatives of the institutions concerned and the current institutional balance.

Speeding up the legislative process: the four-level approach

A Committee of Wise Men on the Regulation of Securities Markets, chaired by Alexandre Lamfalussy, was set up by the Council of Economic and Finance Ministers, in July 2000, to examine the current conditions for implementation of regulation of securities markets in the EU and to assess how the mechanism for regulating these markets can best respond to market developments. With the goal of eliminating barriers and obstacles, this Committee was invited to propose scenarios for adapting current practices in order to ensure greater convergence and co-operation in day-to-day implementation and take into account new developments on the securities markets.

The Committee of Wise Men delivered its final report in February 2001. It proposed regulatory reform based on a four-level approach and the establishment of two committees to assist the Commission: the European Securities Committee (ESC) and the Committee of European Securities Regulators (CESR). The report's recommendations were endorsed by the Commission, the European Parliament and the Stockholm European Council.

The four-level regulatory approach may be described as follows :

  • Level 1 will consist of legislative acts, namely Directives or Regulations, adopted in co-decision by the Council and the European Parliament on the basis of the EC Treaty. The Council and the European Parliament will agree on a case-by-case basis on the nature and extent of technical implementing measures to be decided at Level 2 on the basis of Commission proposals;

  • Level 2 implementing measures will be used more frequently, to ensure that technical provisions can be kept up to date with market and supervisory developments. They will be adopted in application of the 1999 Council Decision on Comitology laying down the procedures for the exercise of implementing powers conferred on the Commission;

  • Level 3 measures will have the key objective to improve significantly the common and uniform implementation of Level 1 and 2 acts in the Member States;

  • At Level 4, the Commission will strengthen the enforcement of Community law;

This regulatory approach will be implemented by the Commission, assisted by the ESC and the CESR.

European Securities Committee - ESC

The role of the ESC will be twofold. It will act in both advisory and regulatory capacities. In its advisory capacity the ESC will advise the Commission on securities issues relating to the adoption of proposed Directives or Regulations under Co-decision (Level 1). The ESC will act in this advisory capacity from [7 June 2001]. The ESC will also formally function as a regulatory committee once its regulatory functions have been defined by Level 2 legislation (such as the proposed Directives on market abuse and prospectuses see IP/01/758 and IP/01/759) that will be adopted by the Council and European Parliament under the co-decision procedure. In this capacity as a regulatory committee, the ESC will assist the Commission in the exercise of implementing powers conferred on it by legislative acts adopted under co-decision.

Committee of European Securities Regulators - CESR

The CESR will act as an independent advisory group to assist the Commission, particularly, though not exclusively, in the preparation of technical implementing measures (Level 2). In so doing, the CESR will act in a fully transparent way, involving market participants, consumers and end-users. The Commission will play a key role, giving the CESR mandates to act within defined time-limits. It will inform the CESR of ongoing political priorities and contribute to discussions on emerging ideas. The Commission will be represented at all meetings of the CESR and will be entitled to participate in its debates. The CESR will also play an important role in ensuring more effective co-operation between the Member States' public authorities so as to ensure more consistent day-to-day implementation of Community legislation (Level 3).

Co-operation between the Committees

In order to ensure close links between both committees, the chairperson of the Committee of European Securities Regulators will participate in the meetings of the ESC as an observer.

European Parliament

When the ESC acts in a regulatory capacity and in order to ensure transparency, the Commission will keep the Parliament informed of the ESC's proceedings on a regular basis. It will also send it all relevant documents. The Commission will also inform the European Parliament of any formal mandate it gives to the independent CESR.

There are major economic and social gains to be made from building an integrated financial market in the EU. Such a market will enable, subject to proper prudential safeguards and investor protection, capital and financial services to flow freely throughout the EU. This will allow more rational allocation of capital and greater liquidity, which will benefit all companies, especially small and medium enterprises. The cost of capital will be lower all around. Consumers will be better able to purchase financial services and securities from the best European suppliers with net yields increasing as investment choice widens.

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